News

Bethesda, MD - October 24, 2005 - American Capital Strategies Ltd. (Nasdaq:ACAS) announced today that it has received total proceeds of $212 million from exits and prepayments of eight portfolio companies, realizing a total net loss of $1 million during the third quarter of 2005.

HMS Healthcare Inc.
American Capital has realized a gain of $6 million in the third quarter of 2005 from the sale of its portfolio company HMS Healthcare Inc., a preferred provider organization, to Aetna Inc. American Capital recognized total proceeds of $49 million upon the exit, earning a 37% compounded annual rate of return on its investment. The 37% return includes the interest, dividends and fees earned over the life of American Capital's investment in the company. The amount realized by American Capital was less than the second quarter 2005 valuation of the investment by $0.2 million, or less than 1%.

In August 2004, American Capital invested $43 million in HMS, a holding company established for the acquisition of Sloans Lake Managed Care ("SLMC") and PPOM LLC, two independent non-risk access preferred provider organizations ("PPOs"). American Capital's investment took the form of senior subordinated debt, junior subordinated debt with warrants and preferred and common equity. KRG Capital Partners was lead equity sponsor.

For information about the HMS transaction click here.

Chronic Care Solutions Inc.
American Capital has realized a gain of $6 million in the third quarter of 2005 from the sale of its portfolio company Chronic Care Solutions Inc. to CCS Acquisition Inc., a company controlled by Warburg Pincus. CCS is a leading provider of quality, branded healthcare products and disease management services to predominantly diabetic patients within the United States. American Capital recognized total proceeds of $90 million upon the exit, earning a 23% compounded annual rate of return on its investment. The 23% return includes the interest, dividends and fees earned over the life of American Capital's investment in the company. The amount realized by American Capital was greater than the second quarter 2005 valuation of the investment by $2.2 million, or 2%.

In November 2003, American Capital invested $39 million in subordinated debt with warrants in the recapitalization of Chronic Care. In July 2004, American Capital invested an additional $33 million in subordinated debt and preferred equity of Chronic Care to support its acquisition of the Pharmacy and Supply Division of Matria Healthcare Inc. KRG Capital Partners was the lead equity sponsor of Chronic Care prior to its sale.

For more information about the Chronic Care transaction click here.

MP TotalCare Inc.
In September 2005, American Capital received full repayment of its $15 million senior debt investment in MP TotalCare Inc., a leading national provider of respiratory medications and diabetic supplies to patients across the United States. American Capital's debt was repaid in connection with the acquisition of MP TotalCare and Chronic Care Solutions by Warburg Pincus. American Capital earned a 16% compounded annual rate of return on its investment. The 16% return includes the interest and fees earned over the life of American Capital's investment in the company.

In October 2003, American Capital invested $15 million in senior debt of MP TotalCare. American Capital's investment supported MP TotalCare's acquisition of Medical Holdings Inc., a leading national supplier of direct to consumer urological products.

For more information about the MP TotalCare transaction click here.

MBT International Inc.
In the third quarter of 2005, American Capital's portfolio company MBT International Inc., a leading international distributor of musical products and accessories, entered into an asset sale agreement and sold all of its operating assets to Kaman Music Corporation. American Capital received cash proceeds of $12 million from the sale as a partial payment on its senior subordinated debt investments. American Capital may receive additional sale proceeds of up to $4 million held in escrow that, if released to American Capital, will be used to pay down American Capital's remaining senior and junior subordinated notes. MBT also still owns commercial real estate for which any sale proceeds will be used to pay down any remaining amounts of American Capital's subordinated debt investments. In the third quarter of 2005, American Capital determined that its common and preferred equity investments were worthless and wrote them off. American Capital realized a net loss of $6 million from the partial payment of its debt investment and write off of its equity investments. American Capital's compounded annual rate of return on its investment is 9%. The 9% return includes the interest and fees earned over the life of American Capital's investment in the company as well as an estimate of American Capital's expected proceeds it will receive for its remaining debt investments. The amount realized by American Capital was less than the second quarter 2005 valuation of the investment by $2.4 million, or 16%.

In July 1999, American Capital invested $14 million in the senior debt, subordinated debt, common stock warrants and preferred stock of MBT. In May 2003, American Capital made a subsequent investment of $7.5 million in MBT for the acquisition of Midwest Musical Instrument Inc.

For more information about the MBT transaction click here.

Senior Note
In September 2005, American Capital entered into a trade to sell senior secured notes of one its portfolio companies for $36 million. American Capital realized a loss of $2 million, earning a 13% compounded annual rate of return on its investment. The 13% return includes the interest and fees earned over the life of American Capital's investment. The amount realized by American Capital was less than the second quarter 2005 valuation of the investment by $2.2 million, or 6%.

Patriot Medical Technologies Inc.
In the third quarter of 2005, American Capital sold its common stock warrant and preferred stock investments of Patriot Medical Technologies Inc. to Sodexho Operations LLC for $1.4 million, resulting in a realized loss of $0.6 million. The amount realized by American Capital was greater than the second quarter 2005 valuation of the investment by $1.1 million.

In 1999, American Capital invested $6.5 million in senior and subordinated debt with warrants and preferred stock in Patriot. Patriot provides asset management and testing and repair services for diagnostic and other medical equipment. In 2003, American Capital was repaid its senior and subordinated debt investments in full. Over the life of its investment in Patriot, American Capital earned a 12% compounded annual rate of return on its investment, including the interest, dividends and fees earned over the life of American Capital's investment in the company.

Weston Solutions Inc.
In September 2005, American Capital received full repayment of its remaining $8 million senior subordinated debt investment in Weston Solutions Inc. (formerly Weston ACAS Holdings Inc.)

In June 2001, American Capital invested $30 million in Weston. In June 2003, Weston completed a recapitalization, which resulted in Weston employees gaining 100% ownership of the firm by purchasing American Capital's equity interests in the company and repaying American Capital's original debt investments, resulting in a total gain to American Capital of $27 million. American Capital provided $12.8 million of senior subordinated debt to finance the employees' purchase of Weston. In the first quarter of 2004, American Capital received repayment of $5 million of the senior subordinated debt. Over the life of its investment in Weston, American Capital earned a 63% compounded annual rate of return on its investment. The 63% return includes the interest and fees earned over the life of American Capital's investment in the company.

American Decorative Services Inc.
In the third quarter of 2005, American Capital sold a portion of its preferred stock and common stock warrant investment in American Decorative Surfaces Inc. for nominal proceeds, recognizing a realized loss of $4 million. American Capital continues to own a controlling interest in American Decorative Surfaces through preferred and common stock investments as well a subordinated debt investment. The amount realized by American Capital was equal to its second quarter 2005 valuation of the investment.

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American Capital's total net realized portfolio gains (excluding interest rate derivative agreements) from its August 1997 IPO, the latest four quarters and year-to-date through the end of the second quarter of 2005 were $35 million, $68 million and $40 million, respectfully. Since its IPO, American Capital has earned an 18% compounded annual return on 99 exits and prepayments of senior debt, subordinated debt and equity investments, totaling $1.8 billion of invested capital, including interest, dividends, fees and net gains on these investments. These exits and prepayments represent 30% of all amounts invested by American Capital since its August 1997 IPO.

For a chart showing American Capital's exited portfolio companies, click here.

ABOUT AMERICAN CAPITAL

American Capital is a publicly traded buyout and mezzanine fund with capital resources of approximately $6.7 billion. American Capital invests in and sponsors management and employee buyouts, invests in private equity buyouts, provides capital directly to private and small public companies and through its asset management business is a manager of debt and equity investments in private companies. American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions and recapitalizations.

As of September 30, 2005, American Capital shareholders have enjoyed a total return of 407% since the Company's IPO - an annualized return of 22%, assuming reinvestment of dividends. American Capital has paid a total of $868 million in dividends and paid $18.29 dividends per share since its August 1997 IPO at $15 per share.

Companies interested in learning more about American Capital's flexible financing should contact Mark Opel, Senior Vice President, Business Development, at (800) 248-9340, or visit our website.

Performance data quoted above represents past performance of American Capital. Past performance does not guarantee future results and the investment return and principal value of an investment in American Capital will likely fluctuate. Consequently, an investor's shares, when sold, may be worth more or less than their original cost. Additionally, American Capital's current performance may be lower or higher than the performance data quoted above.

This press release contains forward-looking statements. The statements regarding expected results of American Capital Strategies are subject to various factors and uncertainties, including the uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional, national or international economic conditions, or changes in the conditions of the industries in which American Capital has made investments.

Contact:
Tom McHale, Vice President, Finance and Investor Relations (301) 951-6122
Brian Maney, Director, Corporate Communications (301) 951-6122

SOURCE: American Capital Ltd.